1. RONALD S. MARTA, CPA BUSINESS COUNSELOR UNIVERSITY OF HOUSTON PROCUREMENT TECHNICAL ASSISTANCE CENTER 713-752-8450 rmarta@uh.edu 1April 11, 2013

2. FEDERAL ACQUISITION REGULATION (FAR) Policies and Procedures for acquisition by executive agencies. CODE OF FEDERAL REGULATIONS (CFR) Administrative Law Based on U.S. Code : Statutes enacted by Congress. U.S, ode 2April 11, 2013

3. Part 31 - Contract Cost Principles and Procedures 3April 11, 2013

4. Government breaks costs into two basic categories: DirectIndirect 4April 11, 2013

5. Directly connected with producing a product or providing a service. Benefit one contract. 5April 11, 2013

6. Costs not connected with a particular product or service, but are needed for business to function. Costs that benefit more than one contract. 6April 11, 2013

7. Payroll Overhead Pool: Social Security, Medicare, health insurance, etc. Costs associated with labor. General and Administrative Pool: Expenses that are necessary for the general management and administration of the business. Management/support labor, home office supplies, professional fees, rent, utilities, etc. 7April 11, 2013

8. Payroll Overhead Base: Productive Labor (direct and indirect) General and Administrative (G & A) Base: Total Cost Input 8April 11, 2013

9. Payroll Overhead G & A Off Site Overhead On Site Overhead Direct Labor Direct Material Other Direct Cost % of Direct Labor % of Direct Labor; may be on other costs % of all other costs (direct costs, payroll o/h, on/off site o/h) Direct Costs Indirect Costs Job 1Job 2Job 3 9April 11, 2013

10. OVERHEAD G & A ACCOUNT POOL BASEPOOLBASE COST OF SALES (DIRECT ONLY): DIRECT MATERIAL $ 100 DIRECT LABOR $1,000 1,000 OTHER DIRECT COSTS 300 TOTAL COST OF SALES $1,400 PAYROLL OVERHEAD SOCIAL SECURITY $ 70 MEDICARE 20 HEALTH INSURANCE 30 VACATION, HOLIDAY &SICK 80 TOTAL PAYROLL OVERHEAD $200$ 200 GENERAL AND ADMINISTRATIVE ACCOUNTING$ 20 DEPRECIATION 30 OFFICE SUPPLIES 20 RENT 70 TELEPHONE 20 TOTAL G & A$160 TOTAL POOL / BASE $200 $1,000$160$1,600 RATE (%) 20 % 10 % ABC Company Indirect Costs 10April 11, 2013

11. University of Houston Procurement Technical Assistance Center 2302 Fannin Street, Ste. 200 Houston, TX 77002 713-752-8477 http://www.ptac.uh.edu 11April 11, 2013